Discharge Flashcards
5 ways a contract might be discharged
a. performance
b. expiry
c. agreement
d. breach
e. frustration
What is meant by discharge by expiration?
A contract will expire when it is completed according to its own terms.
- Contract expiration is often by date ie the parties incorporate a term in the contract which stipulates when the contract comes to an end.
What are the 4 exceptions to the entire completion rule (complete performance)?
(1) Acceptance of partial performance;
(2) Substantial performance;
(3) Divisible obligations;
(4) Wrongful prevention of performance.
Acceptance of partial performance as an exception to the complete performance rule
Where one party has given only partial performance of contractual obligations, it’s possible that innocent party, might accept that part of performance.
- at their discretion
- once accepted, party will be entitled to payment on a quantum merit basis (meaning as much as is deserved).
Substantial performance as an exception to the complete performance rule
More than a partial performance
- obligation to pay full contract price, minus cost of remedying defects.
- Court’s question is whether the defect goes ‘to the root of the contract’ to decide what ‘substantial performance’ is.
Divisible obligations as an exception to the complete performance rule
Where contract allows for performance of one or more obligations separately from others
Wrongful prevention of performance as an exception to the complete performance rule
Where party 1 performs part of obligation but is prevented of completing entirely due to third party’s fault, party 1 is entitled to payment despite incompletion with 2 choices:
1- To sue for damages for breach of contract; or
2- To claim a quantum meruit.
2 ways discharge by agreement may occur
a. by a subsequent contract between the parties
b. by operation of a term of the original contract
discharge by subsequent binding contract
Where parties in a contract haven’t completed obligations and no consideration is given, a mutual waiver of performance constitutes consideration
Repudiatory breach
where one party has breached a term of the contract which is either a condition, or an innominate term which is treated as a condition, entitling the other party to treat the contract as terminated
what 2 elements must be present in order for a discharge to be effective?
accord and satisfaction
- there must be agreement that the obligation will be released (‘accord’), and there must be consideration for the promise to release a party from the obligation (‘satisfaction’).
meaning of a condition precedent
It is a condition in a contract that must be fulfilled before the contract itself or certain contractual rights or obligations become binding
Anticipatory breach
where a party indicates they will not perform their contractual obligations in advance of the date for performance
What is the effect of terminating a contract for repudiatory breach?
it puts an end to all primary obligations of both parties remaining unperformed
Benefits of affirmation (intention to continue with contract)
the contract survives and the rights of the innocent party are preserved.
Limitations of the innocent party’s right to affirm the contract in response to a repudiatory breach
- the cooperation of the breaching party is required for continued performance of the contract
- the innocent party has no ‘legitimate interest, financial or otherwise/ in affirming the contract and continuing with performance
Meaning of frustration (discharge by frustration)
without default of either party, a contractual obligation has become incapable of being performed.
- beyond the control of either party,
- occurs after formation of contract
- which render contract radically different from what was agreed at time of contract
What is meant for frustration to be radically different due to performance being impossible?
- destruction or unavailability of a thing / person necessary to perform the contract
- person= due to death or incapacity
For what reasons may performance be radically different?
- performance is illegal
- performance is impossible
- common purpose is frustrated
If a contract is frustrated, it is brought to an end automatically: the parties have no choice in the matter.
What is meant for frustration to be radically different due to performance being illegal?
Frustration may also occur where a change in the law or state intervention renders performance illegal.
What is meant for frustration to be radically different due to common purpose being frustrated?
Non-occurrence of an event can frustrate purpose of contract if event was central to the common purpose of both parties the fact that it is still physically possible to carry out the contract.
What elements act as a limitation for frustration of contracts?
-Supervening: (event occurs between agreement and performance)
-Unforeseeable: (event must not have been foreseen by parties)
-Neither party’s fault
-Merely an increase in expense
-Provided in the contract
Which act deals with the legal consequences of frustration of contract and which obligations does it deal with?
Law Reform (Frustrated Contracts) Act 1943
- Act deals with obligations arising prior to the frustrating event not future obligations.
